Underground Economy Targeted in Enforcement Effort/ Workers' Compensation Rates

Please see information from the Independent Insurance Agents and Brokers of California regarding Independent Contractors and Workers  Compensation Insurance rates. It is good to see the state going after the underground economy but small business must understand what the definition of an Independent Contractor is. If you want more information on this please let me know.

Scott Hauge
President
Small Business California
2311 Taraval Street
San Francisco, CA  94116
shauge@cal-insure.com
415-680-2188 

 

Monday, May 23, 2016    Thriving Underground Economy Targeted in Multi-Agency Enforcement Effort The California Department of Insurance yesterday, led a statewide enforcement outreach focused on providing information to businesses that may operate in California's multi-billion dollar underground economy. The multi-agency team, which included the Contractors State License Board, the Employment Development Department, Franchise Tax Board, Department of Industrial Relations and local district attorneys visited dozens of locations across the state to educate business owners of their obligations to comply with insurance, licensing, workplace safety, labor laws and tax codes. Safety, licensing and insurance violations were found at approximately 20 of the businesses visited. Some were found to not have required licenses or workers' compensation insurance and were issued immediate stop work orders, others received administrative citations and penalties for workplace safety violations, and some received audit referrals. "Businesses operating in the underground economy create an illegal competitive advantage that puts legitimate businesses at risk," said Insurance Commissioner Dave Jones. "This multi-agency effort is focused on leveling the playing field, so legitimate businesses have a fighting chance in the marketplace." Enforcement teams visited a wide variety of businesses including security firms, restaurants, environmental waste companies, personnel services, home design, roofing, tree services, limousines and charter bus companies, moving companies, retail stores, and construction sites to verify contractors had valid licenses, workers' compensation insurance and to check that workplace safety measures were followed. Tree trimming and removal services caught the attention of the team, as residents look to remove trees killed by wildfire or bark beetles. The U.S. Department of Agriculture reported recently there are more than 40 million dead trees in California posing a significant fire danger. The team verified licenses and workers' compensation insurance and made sure the companies complied with all labor and safety code requirements. Homeowners should make sure contractors they hire, including tree service companies, are properly licensed and have a valid workers' compensation insurance policy. If a contractor does not have workers' compensation insurance, the homeowner could be liable for any worker injuries that occur on their property. Frictional Costs Buffer Projected Workers' Compensation Rate Cut The Workers' Compensation Insurance Rating Bureau Bureau (WCIRB) is recommending an average pure premium rate of $2.30 per $100 of payroll for policies incepting or renewing on or after July 1, 2017. The recommendation from Bickmore's Mark Priven, the actuary for the public members on the Bureau's Governing Committee, is for an average rate of $2.25. Commissioner Jones' approved rate for Jan. 1, 2016 policies is $2.42. WCIRB is a non-governmental private organization financially supported by insurance carriers. Carriers' filed rates have been coming down following two successive rate cuts by Commissioner Jones, but the proposed average rate is still nearly 10% below the industry's average filed rate. Jones noted that this gap indicates that carriers filed rates are still higher than they need to be to cover claim costs and claim handling expenses. "To what extent are industry groups facing higher actual charges than others? Is there a way to draw a conclusion if industry groups are being under or over charged." Insurance Commissioner Dave Jones heard strong support from WCIRB and the public's actuary for a mid-year rate cut of 5% to 7% due to continuing improvement on the medical cost front. However, Jones also heard that the rate cut could be even larger if not for the continued deterioration in loss adjustment expenses due to California's high frictional costs and the abnormal claims environment in the Los Angeles region. In particular, Jones noted an exhibit provided by Priven that showed significant variances by industry between the proposed and filed rates. In all but one instance, the chart shows that carriers filed rates are higher than the proposed rates and in many cases exceed the proposal by 20% or more  (see chart page 10). Jones noted that it is difficult to conclude from the chart if certain industries are being over or under charged and wanted more information. "To what extent are industry groups facing higher actual charges than others? Is there a way to draw a conclusion if industry groups are being under or over charged," Jones asked, urging the Bureau to dig deeper into the issue. WCIRB chief actuary Dave Bellusci noted that the Bureau does have the charged rates by group on older years, but indicated that it would be difficult to tease out that information. t The IIABCal Legislative Report is a compilation of a number of reports including "This Week in Sacramento," produced by IIABCal Lobbyist John Norwood of Norwood & Associates, and a weekly report on legislative activity affecting civil liability issues, produced by the Civil Justice Association of California (CJAC) .